Business lobby blasts new 'gainful employment' proposal for career colleges

The U.S. Chamber of Commerce this week is slamming a new White House proposal designed to ensure that career college students are trained for jobs lucrative enough to pay back their federal loans — an issue for the healthcare industry, because a huge percentage of medical professionals are trained at for-profit institutions.

"This ill-conceived regulation will work against job creation, only resulting in jobs lost and fewer Americans getting the post-secondary education and training they need to secure work in today’s economy," Thomas Donohue, the Chamber's president and CEO, wrote in a letter to the Department of Education (DOE) Wednesday.

Issued last month, the DOE proposal — dubbed the "gainful employment" rule — is a response to allegations that some for-profit colleges have exaggerated the earning potential of their programs, leaving graduates struggling to pay bills when they enter the work force.

"Some of them are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use," Secretary of Education Arne Duncan said when the proposal was released.

Loan defaults don't just harm students' credit ratings, they also affect taxpayers, who provided $24 billion in federal tuition subsidies to for-profit colleges in the 2008-2009 school year.

The administration is proposing to gauge whether a program offers gainful employment based on two separate measures: the debt-to-income ratio of the program, and the rate at which program enrollees repay their loans on time — regardless of whether they graduate or not.

Programs showing high debt-to-earning ratios would be required to inform students and applicants of that trend. Programs could also lose their eligibility for federal student aid programs.

The administration estimates that, if the thresholds remain unchanged, 5 percent of career college programs could no longer offer their students federal aid, while 55 percent would be forced to inform students of high debt-to-income ratios.

In its letter to the DOE, the U.S. Chamber said the proposal sets "arbitrary" benchmarks that would have a "lethal" effect on programs that cater disproportionately to low-income students.

"This rule would implement sweeping change with dramatic consequences to students without an adequate and informed assessment of its full impact," Donohue wrote.

The change is one of 14 new rules proposed by the Department of Education since June. Taken together, the changes are designed to rein in the for-profit education sector amid reports that aggressive recruiting, shady marketing practices — even fraud — are common within the industry.

The changes would likely have an effect on the healthcare sector. Indeed, 42 percent of the health professionals receiving health degrees and certificates requiring two years of schooling or less came out of for-profits institutions, according to the latest survey from the National Center for Education Statistics.

The DOE is accepting public comments on the proposal through Sept. 9, with the final rule scheduled for release by Nov. 1.